The Human Cost

While most small and medium size businesses have significant labor and related costs, most of those companies don't truly connect on what those costs are. The obvious costs of payroll, taxes, benefits, and training are generally where business managers focus. But what about the ancillary costs related to housing employees, communications (phones and PCs), software licenses, training, and the need for more personnel to manage the increase in personnel? And what about the soft costs like morale and "conversation at the water cooler"?

When all has been accounted for, in many companies, human-related costs are so overwhelming, the business spends more time and resources on people and control of those people than on the product it's trying to sell to pay for the people.

So how could today's businesses deal with these costs effectively?

1. Conduct or get an industry survey of wages and then MAKE ADJUSTMENTS WHERE NECESSARY. It is shocking how many companies are out of line with their salary or more often benefits offerings. It's even more surprising how many companies do an industry/geographic wage comparison and then do nothing. My advice is let the data make the call here. Most of the time, the DATA IS RIGHT. It's understandable that a manager or business owner will feel loyalty towards an employee or even call them a friend, but at the end of the day, the manager or business owner has a responsibility to do what is best for the business.

2. Standardize. Consistency and standardization allow for fewer people to do more and do so more efficiently. This sounds hauntingly similar to creating a repetitious "system" your company runs by. While creating a system may feel restrictive, it will promote processes to be repetitive and hence more dependable. And in the end, if you have an error or mistake being made, it's probably either a deviation from your system or a problem within the system that can easily be rectified.

3. Find the best and keep them. If all of those costs listed above are costs that your company incurs, get the right folks on the bus and drive! You're spending some significant resources (and not just cash) so you better make the most of it. And don't forget the cardinal rule regarding these costs: the BEST time to fire someone is BEFORE you hire them! Take your time finding the right folks, follow a process in hiring, and demand accountability.

4. Share the info. If you have the right folks on the bus in the right seats, then allow them to participate with the same institutional knowledge that you have. Said differently, share the books with them. I'm not suggesting sharing salaries or allowing them to participate in bonus discussions, but good teams result from trust and equal dependance. Almost every one of them will be flattered and more importantly take it very seriously. And here's the scary part..you might find someone who's as good or better than you and they might even have some ideas that would benefit everyone.

5. Give them lemons, tell them how much lemonade you want, then stand back. If you muck up the works by "controlling" how everything happens, you are in fact preventing #2 above from taking place. Coach behaviors and pay for results. Enough said.

6. Get rid of the box. Be creative with how and where you work especially if you are in a boring industry like accounting or law (sorry, but budgets, asset valuation, cash burn rates and tax advantages can be dry in most any discussion). Get "OK" with folks working from home or finding the nearest coffee shop to pound out a report in. The days of bricks and mortar and trotting into the office for an 8 to 5 session behind a desk are coming to an end. Just ask HP.

7. You've created a community, now you have to manage it!! Encourage every member of the team to participate through every avenue of communication you can find. Instant messaging, email, blogs, et. al. Social media is the new buzz. It's free, cheap and quick so maybe it's here to stay, but regardless, it's another way to interact. Oh, and by the way, whether you encourage or discourage this type of communication, IT WILL HAPPEN. Take a second and just imagine your employees coming in the office and tweeting about how awesome it is to work for your company. Now imagine how much it would really wreak havoc on your image if they came in and tweeted about how much you and/or your company cause them to lose sleep! You may have a sudden urge at this point to go out and spend hundreds of thousands of IT and security dollars to "keep things secure and minimize risk" by limiting external communication, but the reality is, that security will only cause distrust in you and your IT outsourcer to get rich.

So of the seven points above, most all of it has been focussed on the "hard and soft" costs of personnel. The honest truth is that the greatest percentage of people that leave companies (sans those dotcom crazies and professional athletes) do so because the company they have left sorely lacked professional and competent management. Money is almost never the reason. Shocking isn't it? More on competent management in future posts.